Tenant paid the entire rent for the duration of the lease

17 Replies

I have a tenant willing to pay the entire one year of rent upfront for the one year lease to start. Will you allow? Is it common to happen to the landlord? Tenant does not have the credit history to show from the past.

I have been offered this many times. I never accept it. If they have the money to pay up front than they have the money to pay it monthly. What they are asking you to do in effect, is take all the money up front and disregard their credit and manage their finances for them , which they are perfectly capable of doing themselves. I would put these tenants on a month to month lease and explain to them that you have no intentions of kicking tenants out on a whim as it never benefits a landlord to have a vacant unit. So as long as they perform their end of the deal on a monthly basis, they can stay as long as they like. That is if you decide to waive your application requirements for them as they obviously don't feel that they qualify in the first place. 

I had a potential tenant also just offer to pay through January - she is getting a bonus from work, and wants to enjoy the thought of not having rent for the next 6 months.  I personally don't see any issues with her doing that.  She has a long job history, and she probably just wants to feel the freedom of not having to pay rent every month!  Plus it's more money in your pocket upfront.  It's a win/win.

Not common.  I would want to understand why they want to pay a year in advance.  I get concerned when tenants make it too enticing to rent to them.  Usually comes with problems.

The only tenant I've had offer was a complete no-go other than they had the cash at the moment.  They also had a previous apartment complex that they owed over $6,000 to!

IF I ever take that, the money would be escrowed and each month would be paid out of that.  

Been discussed on BP MANY MANY times...do a search.....

There can be instances where this plan makes sense.....client travels a lot or has a big influx of $$ etc..... but most of the time its a HUGE red flag.....at least to me. They are playing on your greed to overlook something...... bribing you.....baiting you to ignore your gut.

They would have to be a stellar tenant candidate in every other aspect and I would 2-3x my due diligence on them.....AND there would have to be reasonable explanation for them wanting to do it......

99% of the time, I'm gonna pass on this offer......

@Ken Yeung I have had two tenants pay for a year at a time. It worked out fine in both cases, one is still a tenant and is paying six months at a time now. Cash up front can be a sign of trouble, but is not automatically trouble. I have rejected a couple people who wanted to pay cash up front too.

My suggestion is understand the full situation before passing judgement. You will also want to check state laws, because taking more than one or two months rent is not allowed in certain states. In other states, you need to put the money into an interest bearing account and credit them the interest. 

I have been offered this many times and each time I have refused because I was not able to verify employment, tax returns, previous rental history or some other important application information.  You don't have to automatically reject them on that basis alone.  You have to look at the whole picture and don't sacrifice your renter criteria.  In addition,  @Joe Splitrock makes an excellent point about state laws.  I see that you are from NY, which has some of the most tenant friendly laws (along with California) in all the states.  If your property is in NY make sure you know your landlord/tenant law like the back of your hand cause I will guarantee you that your renters do. 

situational but most of the time I say HARD PASS

If it's a new tenant then no way 

if it's in exchange for poor credit or something else that would disqualify them, also no

the big problem is now you have all their money and it provides you less leverage to evict if they mess up. You can't spend the money in case you have to pay boot them and pay it back, so you become a holding account for someone. Why can't they hold it and pay it to you normally? 

If these tenants are a nightmare you will have an impossible time evicting them.  Ten extra people, dealing or cooking drugs, parties, pigsty, damaging the property, whatever, they paid the rent and you accepted it.  You will have a very hard time controlling them.  And once the prepaid rent is gone, do not expect another rent payment.

I have a college student in my multi-family that paid for the year in advance.  She's only been in there for 2 months but she's been quiet and I  haven't had any problems.

Originally posted by @Ken Yeung :

I have a tenant willing to pay the entire one year of rent upfront for the one year lease to start. Will you allow? Is it common to happen to the landlord? Tenant does not have the credit history to show from the past.

I see you're in NYC Ken. I used to live there, and worked as a rental real estate agent at one point, and this was fairly common. A lot of international people from Asia and Europe, who had money, would pay the whole year up front, to get the place they desired. I think NYC, like Los Angeles or San Francisco, is a different beast when it comes to these things, than many other rental markets. In other cities, I'd say someone paying the whole years rent sounds shady - in a city that is arguably the cultural and financial capital of the world, and attracts people with money and go-getters in general, this is far less questionable. 

If they have no credit, I think it's a decent deal. If they have BAD credit, or any evictions, then absolutely not, given how hard it is to evict problem tenants in NYC. 

I would confirm what their job or school plans are. I don't think someone with no job or school, who is just sitting on money, is a great idea, unless they're of retirement age, disabled, or have another reasonable explanation. 

No. I don’t think it is normal. Why would they pay in advance with a full year rent? Is there any possibility that they don’t have a stable income?

About a year ago, I had a tenant applicant made a similar offer to one of my properties once.  His credit wasn't too bad.  But something was a little suspicious after he mentioned he has applied at more than 10 places and never got accepted.  He even said he would pay $100 more for the monthly rent if we pick him over the other applicants.   He even showed his bank statements showing proof of funds.  After chatting with him for a while, he fessed up and said that he was a cannabis grower and recently just opened a dispensary a few blocks down the street from my rental property. He wanted to fully disclose it and was begging I would just give him a break.  Just fyi.. its legal to have a cannabis dispensary in Los Angeles... incidentally, that ruling had just passed during this time.   As tempting as it was, I didn't want to take any chances and decided to go with another applicant.  That said, I feel terrible about the decision and still keep wondering if I should've been more understanding.